London Forex Report: GBP And AUD Short Squeeze
Littlefish FX | May 17, 2016 06:27AM ET
London Forex Report:
Market risk sentiments improved following renewed surge in equities and oil prices, while dataflow remained very much mixed.
US Empire manufacturing index staged a surprised contraction, pointing to extended brittleness in manufacturing activities as global demand remained lackluster. Slowing new orders exerted a drag on shipment and delivery time. Meanwhile, the firm NAHB housing market index confirmed steady trajectory in the housing market.
USD slipped as risk sentiment improved, buoying commodity majors. The US Dollar Index eased 0.04% to 94.57 at closing, but was visibly off lows after rebounding in US afternoon. USD remains bid as markets anticipate a retreat in market risk sentiment ahead of FOMC minutes to provide upside support; expect bullish bias to accelerate on improvement in US data.
FX Majors:
EUR with a lack of macroeconomic data on Monday. Today, markets focus on the ECB’s Praet's speech due this afternoon, as well as the Eurozone trade balance and the US CPI data due today.
GBP dropped to a three-week low against the USD on Monday while the cost of hedging against the falls in the coming two months surged, amid warnings about the impact of a potential Brexit. Most recent polls about the June’s referendum show the outcome is still too close to call. The latest poll from an agency showed “In” camp holding an eight-point lead over its “Out” rivals.
Japan’s top currency diplomat Masatsugu Asakawa said excess volatility in currency markets may have adverse effects on the economy, the Nikkei newspaper reported on Monday, signaling Tokyo’s readiness to intervene in the currency market if yen rises were excessive.
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Get The News You Want
Technical: Prior support at 1.1350 now becomes resistance while this area contains upside reactions, expect a test of 1.1240 as interim support as bears now target symmetry support at 1.1065, only over 1.1450 eases immediate downside bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral
GBP/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Get The News You Want
Technical: Bids ahead of 1.4316 primary symmetry support see GBP surge over night. The short squeeze now targets range resistance at 1.4530. Only over 1.4550 eases immediate bearish bias
Retail Sentiment: Bearish
Trading Take-away: Long
USD/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: As 108.20 supports, expect a retest of offers at prior highs en route to symmetry swing resistance at 109.80, where trend selling should re-emerge. Over 111 eases immediate bearish bias
Retail Sentiment: Neutral
Trading Take-away: Neutral
EUR/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: Bears now target weekly symmetry objective at 120.60. Intraday resistance at 124.65. Only a close above 126.80 eases immediate downside pressure.
Retail Sentiment: Bearish
Trading Take-away: Long
Commodities FX:
Gold finished almost unchanged at $1,274.16 an ounce, after as much as 1.2% to a one-week high of $1,288.83 in early NY trade, as a building risk-on sentiment on Monday trade reduced the appeal for gold.
Oil hit six-month highs overnight, with WTI futures rising by $1.51, or 3.3%, to end at $47.72, near session highs of $47.98.
AUD slumped to multi-month lows against major currencies on Monday after soft Chinese economic data and falling iron ore prices knocked out the commodity currencies.
CAD gained against USD yesterday amid oil prices rallying to a six-month high yesterday, and Canadian home sales jumped in April to their highest level ever.
AUD/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Technical: .7240 level survives on a closing basis, and the anticipated window to correct the recent pullback to test symmetry resistance sited at .7580 is in play. Intraday resistance is sited at .7400
Retail Sentiment: Bullish
Trading Take-away: Sidelines
USD/CAD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: 1.30 upside objective achieved expected a correction to retest 1.2740/60 is underway. This level should now act as support for further upside corrective action.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
XAU/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Get The News You Want
Technical: Gold has tested and held the 1260 symmetry swing level. 1283 is now resistance for a further leg of corrective price action to set up a test of the pivotal 1240. A close over 1285 suggests early upside reversal targeting a retest of 1303 next.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
Crude Oil
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: As 46.70 supports 50.00 becomes the material upside objective, with a symmetry swing target sited at 50.51 ahead of the larger AB=CD swing objective at 51.09. Only a close below 43.00 threatens bullish bias.
Retail Sentiment: Bearish
Trading Take-away: Long
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.